"We've seen this in the past with First Home Owner Grants … where the unintended consequences, it can actually push the price of housing up because developers, and those who have existing houses, will actually see it as an opportunity for the price to increase," Mr Banks said.

"Any move in this way needs to be carefully and closely analysed."

Mr Banks said stamp duty in Victoria was among the highest in Australia, and taxes could account for up to 38 per cent of the price of a new detached home.

"We'd rather see a reduction in those overblown taxes. That would be a firm and real move towards improving housing affordability."

Real Estate Institute of Victoria chief executive Gil King agreed prices could be pushed up slightly, but said if buyers did their research they would benefit.

"If they shop around very cleverly and do their homework they can certainly pick up a good-priced home and move into it with the benefit of having a $20,000 injection into their deposit."

Grant will boost appeal of living in country Victoria: Pallas

Felicity Maher has been renting in Bendigo for a decade, but eventually wants to buy a place in the city centre.

She said a boost to the First Home Owner Grant should cover both newly built houses and existing ones.

"The vacant lots that I've seen for sale in inner Bendigo have been quite expensive. I've then got to factor a new build with that," she said.

"The price of that is just a lot more, a brand new dwelling is so much more than existing."

Treasurer Tim Pallas said doubling the grant would increase the appeal of living outside of Melbourne for young families.

"This is such a substantial boost to the position and the capacity of first home owners," he said.

"It'll put them on that first rung of movement into their first home, so it'll make it easier for young people in regional Victoria to buy and live in their community."